Question

needing help

Our company is evaluating a project with the projected future annual cash flows shown as follows and an appropriate cost of capital of 14.0%: Period O. 5-8,000: Period 1: 5-4.500.: Period 2 5100: Period 3: 58,300: Period 4 54,700.: Period 5: $750: Compute the Payback statistic for the project and whether the company should accept or reject this project it the mascimum allowable payback period is 50 years." 0 14 24 years, Accept 3.44 years. Reject O 3.44 years. Accept O 3.87 years, Reject O "3.87 years, Accept 0 14 24 years. Reject Insufficient data provided to calculate this statistio QUESTIONS "FIN 340 Company stock is currently trading for $270.00 per share, anticipates its dividend during the upcoming year will be 57 25 pershare, and is projecting a sustainable future growth rate of 5.00% per year what is the required return for this stock? 730% O 12.25 7.50 5.00% 10.00 2.50 7.704

Answer 1

Ques-7)

Computing the Payback period for the Project:-

Year	Cash Flows ($)	Cummulative Cash Flows ($)
0	-8000	-8000
1	-4500	-12500
2	100	-12,400
3	8,300	-4,100
4	4,700	600
5	750	1350

Payback Period = Years before the Payback period occurs + (Cummulative cash flow in the year before recovery/Cash flow in the year before recovery)

= 3 years + (4100/4700)

= 3.87 years

As the maximum allowable payback period is 5 years & Project's payback period is 3.87 years.

The Project should be ACcepted

Ques-8)

Expected Dividend for coming year (D1) = $7.25 per share

Current Share Price (P0) = $279.80

Growth rate(g) = 5%

Calculating the Required rate of Return of Stock(Ke) :-

Ke = D1/P0 + g

=7.25/279.80 + 0.05

= 7.59%

Hence, Option C. 7.59%

If you need any clarification, you can ask in comments.     

If you like my answer, then please up-vote as it will be motivating